Washington – A wave of optimism swept global stock markets on Wednesday after US President Donald Trump talked about the possibility of ending the war in Iran within two to three weeks.
European markets closed significantly higher, with the Paris stock market gaining 2.10%, Frankfurt 2.73%, London 1.85%, and Milan climbing 3.17%. In Zurich, the SMI ended with a gain of 1.68%.
In the United States, Wall Street closed in the green for the second consecutive session: the Dow Jones rose 0.48%, the Nasdaq index advanced 1.16%, and the broader S&P 500 index gained 0.72%.
“The New York market was going through a period of excessive decline, so a rebound was necessary,” said Tom Cahill from Ventura Wealth Management.
“And the announcement of a possible truce in the Middle East conflict was the catalyst that boosted the market,” added the analyst.
The US President stated on Tuesday that the US will soon leave Iran, mentioning a timeframe of “two, maybe three weeks.”
He also mentioned on Wednesday that the Iranian President demanded a ceasefire, but conditioned any truce on the reopening of the strategic Strait of Hormuz, a key passage for Middle Eastern oil currently blocked by Iran.
“But the information circulating is quite contradictory,” noted Tom Cahill.
“There are still significant areas of uncertainty,” added Fawad Razaqzada, a market analyst for Forex.com.
The Iranian government rejected Trump’s claims and stated that the Strait of Hormuz would remain closed to the country’s “enemies.”
Regarding military operations, the Iranian army announced on Wednesday evening that they conducted a new wave of strikes against Israel and US bases in the Gulf.
“All of this contributes to creating a very confusing climate for investors,” summarized Mr. Cahill, adding that “we will know more tonight thanks to the President’s address.”
Donald Trump is scheduled to speak at 9:00 PM (01:00 GMT on Thursday) to “provide new important information about Iran,” according to the White House.
“As US stocks have been more resilient, the potential for growth is stronger on the European side,” highlighted Christopher Dembik, an investment strategy advisor at Pictet AM.
Oil Price Calms Down
Donald Trump’s statements also calmed down oil prices, “but a Brent remaining around $100 per barrel shows that the market isn’t fully convinced yet,” tempered Fawad Razaqzada.
The Brent barrel for June delivery lost 2.70% to $101.16, after dropping more than 5%.
Its American equivalent, WTI for May delivery, declined 1.24% to $100.12.
“There is simply too much uncertainty, both regarding supply disruptions and geopolitical escalation, for prices to actually readjust significantly downwards for now,” summarized Mr. Razaqzada.
Dollar Weakens
The US dollar also lost ground following the trend in oil: by 8:30 PM GMT, it fell 0.29% against the euro to $1.1586.
“The dollar was the ideal safe haven after the conflict started,” noted Adam Button from ForexLive, as the US – the world’s top oil producer – is technically less exposed to an oil shock.
The American currency also benefited from the rise in oil prices, which are denominated in dollars.
Calmness in the Bond Market
There was also a sense of calm in the government bond market, weighed down by inflation risks that concern investors.
Germany’s ten-year bond yield dropped below 3% for the first time in several days (2.99%). The French equivalent displayed a 3.68% yield over ten years, compared to 3.72% the previous day.
Bond yields rise with inflation risks as creditors seek guarantees against the erosion of the value of their invested capital.
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